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The Effect of Bank Indonesia 7-Day Reverse Repo Rate on Profitability and Banking Capital in Indonesia

Author

Listed:
  • Made Wikananda Manik Wasita

    (Udayana University, Indonesia)

  • Luh Gede Sri Artini

    (Udayana University, Indonesia)

  • I Made Dana

    (Udayana University, Indonesia)

Abstract

Changes in the reference interest rate of Bank Indonesia from the BI Rate to the BI 7-Day Reverse Repo Rate cause differences in the tenor of depositing funds in Bank Indonesia Certificates, percentages, and interest income earned, which will cause differences in bank financial performance, particularly in bank profitability and capital. Bank profitability is measured using ROA, ROE, NIM, and bank capital is measured using CAR. The purpose of this study is to analyze the differences in banking profitability and capital before and after the BI 7-Day Reverse Repo Rate so as to determine the effect of the BI 7-Day Reverse Repo Rate on banking profitability and capital in Indonesia. The sample in this study is 4 bank through purposive sampling at state-owned commercial banks that were registered on the Indonesia Stock Exchange and had published quarterly financial reports at the Financial Services Authority in the period 2012-2020. This study uses non-participant observation methods and the Wilcoxon Signed Rank Test. The results show that there are significant differences in banking profitability and capital in Indonesia before and after the BI 7-Day Reverse Repo Rate, thereby proving that the BI 7-Day Reverse Repo Rate has a significant effect on banking profitability and capital in Indonesia.

Suggested Citation

  • Made Wikananda Manik Wasita & Luh Gede Sri Artini & I Made Dana, 2022. "The Effect of Bank Indonesia 7-Day Reverse Repo Rate on Profitability and Banking Capital in Indonesia," European Journal of Business and Management Research, European Open Science, vol. 7(2), pages 90-95, March.
    • Handle: RePEc:epw:ejbmr0:v:7:y:2022:i:2:id:51338
    DOI: 10.24018/ejbmr.2022.7.2.1338
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